Parsing the election results and what they mean for the economy

Now that the election’s over, what does it mean for the economy? Other forces of more consequence are at work, including today’s FOMC meeting where the Federal Reserve is likely to announce some expansion of the money supply. Inflation doomers are already in full cry — are we creating the next credit bubble, a la 2004, or even a 1970s-style price spiral up, up and away? Or will Ben Bernanke be right about the danger of deflation? And what of our dear friends Freddie and Fannie, not to mention the huge sums of toxic “assets” taken off the hands of the banks by the government.

The conventional wisdom is that the Republican win of the House of Representatives will lead to gridlock. And that’s different from…? It’s not as if the Democratic majority was doing a new New Deal before, so effective was GOP minority opposition and so bought off were many Dems by special business interests. Still, this new standoff could be more consequential. Imagine if Sen. Rand Paul refuses to raise the national debt ceiling, for example? And the House has great power on the budget side. So this is going to be interesting and unpredictable. Memo to voters in a mixed economy heavily dependent on government spending: Be careful what you ask for.

As the parties focus on 2012, gridlock will be good for the short-term profits and narrow interests of many big industries. Any effort to mitigate climate change, for example, is dead (if that hadn’t already happened under the socialist reign of terror now ending). Happy days for the fossil fuel sector, whatever the longer-term costs to society. The list goes on.

Does the election mean the uber triumph of money, especially in the wake of the Supreme Court’s Citizens United decision? The U.S. Chamber of Commerce, the Koch Brothers, Wall Street and other big GOP funders certainly had a big day, and they will get policies (even more) to their liking. Still, former eBay CEO Meg Whitman is $163 million of her own money lighter and still not governor of California.

As to the “get government out of the way of the private sector” argument, we’ll see. For one thing, what does that mean? That Washington should have gotten out of the way of the financial system’s collapse? Or gotten out of two wars and global overstretch so capital can be deployed more constructively by the private sector? Or gotten out of farm and export supports? Or let GM and Chrysler fail? We see how the jackboot of the Obama Interior Department was on BP ahead of the spill, and the many criminal prosecutions of Wall Street executives carried out by Eric Holder.

Health-care “reform,” whatever it was, won’t happen now. So we’ll see if that gets the economy moving again. Conspiracy theorists wonder about a “capital strike” by big business and the wealthy, which will now be ended. Or if the Republicans can simply be the beneficiaries of an upswing in the business cycle. None of this is likely. The problems in the economy are deep and profound. So where does the popular anger over the economy flow next? One does have to wonder if Mr. Obama became a one-term president last night.